i have mutual fund portfolio of about 90 lakh. i want to consolidate these to a few schemes, for which i need your suggestion. I am 60 and retired and am looking for 1.5 lakh per month return for next 25 years. Possible?

Ans: You may continue with 1, 2, 3, 4, 7, 16 and 20.

 

Ans: Firstly, congratulations on building a substantial mutual fund portfolio over the span of your career. Your disciplined approach towards investing has certainly paid off.

Given your goal to generate 1.5 lakhs per month from your investments, it's essential to strike a balance between growth and income-oriented schemes. With a portfolio of 1 cr, achieving a monthly income of 1.5 lakhs might be challenging without dipping into the principal amount, especially considering the current market conditions and interest rates.

To achieve your desired income, you might need to consider a combination of mutual funds that focus on both growth and dividends. However, relying solely on dividends might not be sustainable, as it could impact the growth of your principal amount over time.

Considering consolidating your portfolio into fewer schemes could make it easier to manage and monitor. Look for well-established funds with a consistent track record of delivering returns and consider diversifying across asset classes to manage risks.

It might also be beneficial to consult with a Certified Financial Planner to develop a customized withdrawal strategy that aligns with your financial goals and risk tolerance.

Remember, investing is a journey, not a destination. Regular reviews and adjustments to your portfolio will be crucial as you transition into retirement.

Ans: Firstly, congratulations on diversifying your investments across various mutual funds. You’ve made a commendable effort to invest systematically, both through SIPs and lump sum. Your commitment to securing your financial future is truly impressive.

However, managing 21 different mutual funds can be overwhelming and counterproductive. It may lead to over-diversification, reducing the impact of potential gains and increasing complexity. Let’s explore how you can consolidate your portfolio into 5-6 high-quality schemes while maintaining a balanced and effective investment strategy.

Assessing Your Investment Objectives
Before streamlining your portfolio, let’s understand your investment goals. These goals could include:

Long-Term Growth:

Building wealth over a long period, focusing on high-growth potential.
Tax Saving:

Reducing tax liability while investing, typically through ELSS funds.
Balanced Approach:

Combining stability and growth through a mix of equity and debt.
Sectoral Exposure:

Investing in specific sectors to leverage industry-specific growth.
Capital Preservation:

Minimizing risk and preserving capital while generating modest returns.
Each of your existing funds might align with one or more of these objectives. It’s essential to retain funds that best fit your primary goals.

Understanding Over-Diversification
Having too many funds can dilute the benefits of diversification. Here’s why over-diversification may not be beneficial:

Redundancy:

Multiple funds may hold similar stocks, leading to overlapping portfolios and reduced diversification benefits.
Complex Management:

Tracking and managing numerous funds is time-consuming and can complicate performance evaluation.
Diminished Returns:

Spreading investments too thin can lead to average performance, as high-performing funds’ impact gets diluted.
To avoid these issues, it’s wise to focus on a select few, well-performing funds that align with your investment strategy.

Categorizing Your Existing Funds
Let’s categorize your 21 funds based on their types and focus areas. This will help in identifying redundancy and areas to consolidate.

Equity Funds:

Focus on growth through investments in stocks.
Debt and Balanced Funds:

Aim for stability and regular income by investing in a mix of equity and debt.
Tax-Saving Funds (ELSS):

Provide tax benefits under Section 80C along with growth potential.
Sectoral and Thematic Funds:

Invest in specific sectors or themes to leverage industry growth.
Identifying Redundant Funds
By comparing funds within each category, we can pinpoint overlapping investments. Here’s how we categorize your existing funds:

Equity Funds:

Aditya Birla Sun Life Flexicap Fund, Canara Robeco Bluechip Equity Fund, ICICI Prudential Bluechip Fund, IDFC Sterling Value Fund, Kotak Multicap Fund, Kotak Small Cap Fund, Parag Parikh Flexicap Fund, PGIM India Flexicap Fund, PGIM India Midcap Opportunities Fund, Sundaram Select Midcap - Regular Plan.
Balanced and Debt Funds:

Nippon India Balanced Advantage Fund, IDFC Dynamic Equity Fund.
Tax-Saving Funds (ELSS):

Axis ELSS Tax Saver Fund, HDFC Tax Saver - Regular Plan, ICICI Prudential Long Term Equity - Tax Saving Fund, Mirae Asset ELSS Tax Saver Fund, Nippon India Tax Saver - ELSS Fund.
Sectoral/Thematic Funds:

Aditya Birla Sun Life Digital India Fund, ICICI Prudential Commodities Fund, Nippon India Value Fund, Kotak Emerging Equity Scheme.
Selecting 5-6 Core Funds
To streamline your portfolio, choose funds that offer:

Diversification Across Market Caps:

Include large-cap, mid-cap, and small-cap exposure.
Sectoral and Geographical Diversification:

Ensure a mix of sectors and international exposure, if possible.
Balanced Risk and Return:

A combination of high growth and stable funds.
Based on these criteria, here’s a selection process for your core portfolio:

Equity Funds
Large-Cap Fund:

Choose a fund focusing on blue-chip companies for stability and consistent growth.
Flexi-Cap Fund:

Opt for a fund that invests across market caps based on opportunities.
Mid/Small Cap Fund:

Select a fund focusing on mid or small-cap stocks for higher growth potential.
Balanced Fund
Balanced Advantage Fund:
Retain a fund that adjusts the equity-debt mix dynamically based on market conditions for balanced risk and return.
Tax-Saving Fund (ELSS)
ELSS Fund:
Pick one ELSS fund that offers good historical performance and tax benefits.
Recommendations for Core Funds
Based on your existing investments and the criteria above, here are 5-6 funds to consider:

Large-Cap Fund:

ICICI Prudential Bluechip Fund: Offers exposure to large-cap companies, providing stability and steady growth.
Flexi-Cap Fund:

Kotak Flexi Cap Fund: Provides diversification across large, mid, and small-cap stocks, capturing market opportunities.
Mid/Small Cap Fund:

PGIM India Midcap Opportunities Fund: Focuses on mid-cap stocks with strong growth potential.
Balanced Advantage Fund:

Nippon India Balanced Advantage Fund: Balances risk and reward by adjusting equity-debt allocation dynamically.
ELSS Fund:

Mirae Asset Tax Saver Fund: Provides tax-saving benefits along with potential long-term growth.
Implementing the Switch
To transition smoothly:

Evaluate Performance:

Compare the past performance, risk metrics, and portfolio holdings of the selected funds.
Check Fund Objectives:

Ensure the new funds align with your financial goals and risk tolerance.
Plan the Switch:

Gradually switch your existing investments into the chosen core funds. Avoid large, sudden shifts to mitigate market timing risks.
Monitor and Adjust:

Regularly review your consolidated portfolio. Make adjustments as needed based on performance and changing goals.
Ensuring a Balanced Portfolio
After consolidating your portfolio, maintain a balanced approach:

Diversify Within the Funds:

Each selected fund should have a well-diversified portfolio across sectors and stocks.
Align with Goals:

Ensure your investments are aligned with your long-term goals, risk appetite, and financial plan.
Stay Informed:

Keep yourself updated on market trends and fund performance. This helps in making informed decisions.
Managing Risks and Returns
While reducing the number of schemes simplifies your portfolio, it’s essential to manage risks effectively:

Avoid Over-Concentration:

Ensure no single stock or sector dominates your portfolio.
Assess Risk Levels:

Consider the risk levels of each fund and how they fit into your overall risk tolerance.
Balance Growth and Stability:

Include funds that provide both growth and stability to cushion against market volatility.
Planning for the Long-Term
To ensure your investment strategy supports your long-term goals:

Focus on Consistency:

Choose funds with a consistent track record of performance across different market cycles.
Reinvest Dividends:

Opt for growth options to benefit from compounding returns over the long term.
Review Periodically:

Regularly review and rebalance your portfolio to stay aligned with your financial objectives.
Final Insights
Streamlining your mutual fund portfolio from 21 schemes to a focused selection is a wise move. Here’s a summary of your next steps:

Consolidate Smartly:

Choose a balanced mix of funds that provide diversification and align with your goals. Opt for stability in large-cap, growth in mid/small-cap, and balanced exposure.
Simplify Management:

Reducing the number of funds makes it easier to track performance, manage investments, and achieve desired outcomes.
Monitor Regularly:

Keep an eye on your consolidated portfolio. Adjust as needed to ensure it meets your long-term financial goals.
Seek Professional Advice:

If needed, consult a Certified Financial Planner to refine your strategy and ensure optimal fund selection.
By focusing on a streamlined, high-quality portfolio, you position yourself for better returns, easier management, and more peace of mind.

Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

www.holisticinvestment.in

Ans: Reviewing Your Current Portfolio
You have invested in many mutual funds since 2007. Let's streamline your portfolio to focus on a few high-performing funds.

Evaluating Fund Categories
Large Cap Funds
HSBC Large Cap Fund - Regular IDCW
DSP-BR Top 100 Equity - RP ICDW (D)
Sundaram Large Cap Fund Regular - IDCW
SBI Contra Fund (D)
Large Cap funds provide stability and steady growth. Keep funds with consistent performance.

Flexi Cap Funds
Franklin India Flexi Cap Fund - IDCW
Flexi Cap funds offer a balanced approach. They invest across large, mid, and small caps. Retain those with a strong track record.

Mid Cap Funds
SBI Magnum Midcap Fund (D)
Edelweiss Mid Cap Fund (Regular Plan - IDCW Option - Payout)
Mid Cap funds offer higher growth potential but come with higher risk. Retain the best performers.

Sector/Thematic Funds
Nippon India Power and Infra Fund
HDFC Infrastructure Fund (D)
HSBC Progressive Themes (D)
HSBC Advantage India Fund
Sector funds focus on specific industries. They can be volatile. Evaluate their performance and market outlook.

Diversified Equity Funds
DSP-BR India TIGER - RP (D)
Sundaram Diversify Equity Fund - Regular - IDCW
These funds invest in various sectors and companies. Retain those with strong, consistent returns.

Large and Mid Cap Funds

Mirae Asset Large and Midcap Fund (formerly Mirae Asset Emerging Bluechip Fund) - SIP
These funds balance between stability and growth. They are a good addition for diversification.

Children's Funds
HDFC Children's Gift Fund - Regular Plan (Lock-in) - SIP
These funds have a specific goal in mind. They are usually kept for a longer-term investment.

Consolidation Strategy
Reduce Overlap
Consolidate Large Cap funds. Choose one or two top performers.
Reduce the number of Sector funds. Focus on those with a positive outlook.
Keep the best-performing Mid Cap funds. Avoid too many in this category.
Focus on Performance
Retain funds with strong historical performance and potential.
Let go of funds with inconsistent returns or underperformance.
Allocate More to High Performers
Invest more in top-performing funds. This enhances returns and reduces management complexity.
Avoid spreading investments too thin across many funds.
Consider Fund Management Style
Opt for actively managed funds. They offer the potential for higher returns.
Avoid index funds due to their passive nature and lower flexibility.
Benefits of Regular Funds
Investing through an MFD with CFP credentials provides guidance.
Regular funds offer support and advice, unlike direct funds.
Suggested Actions
Large Cap and Flexi Cap Funds
Retain top-performing Large Cap and Flexi Cap funds. They provide stability and balanced growth.
Mid Cap and Sector Funds
Focus on the best-performing Mid Cap funds.
Retain Sector funds with positive outlooks. Evaluate their potential in the current market.
Diversified Equity Funds
Keep diversified funds with consistent returns. They provide broad exposure and reduce risk.
Children's Funds
Maintain investments in children's funds. They are aimed at long-term goals.
Final Insights
Streamlining your mutual fund portfolio is essential. Focus on a few high-performing funds. Consolidate your investments for better returns and easier management. Opt for actively managed funds and regular funds through MFD with CFP credentials. This strategy will help you achieve your financial goals effectively.

Best Regards,

K. Ramalingam, MBA, CFP

Chief Financial Planner

www.holisticinvestment.in